Water companies in England and Wales explore ‘surge pricing’ during drought

Water Scarcity and Pricing Models

Water companies in England and Wales are exploring a new pricing model that would allow them to raise bills for customers during periods of drought. This proposal is part of Ofwat's plans to reduce consumption and is being likened to surge pricing, where private hire firms raise taxi fares at times of higher demand.

The move has been met with criticism from customers who are already struggling with rising water costs. Public anger over the behaviour of water companies has soared in recent years as bills have continued to climb even while sewage has flowed into the nation's waterways and firms have increased bosses' pay and handed out millions of pounds in dividends to shareholders.

Ofwat's proposals come after the 30 July conclusion of its consultation on changing the rules relating to wholesale charging. The regulator is due to share its final decision shortly. An Ofwat spokesperson said: 'The efficient use of water is in the best interests of everyone, including businesses. The options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges, and encourage more tariff innovation.'

Several water companies have been carrying out charging trials over the past few years aimed at making bills more affordable and, potentially, reducing demand. South West Water, which supplies water to about 1.8 million customers across south-west England, including Cornwall and Devon, is trialling a 'rising block tariff', where about 500 household customers are charged a cheaper rate for using a lower amount (or 'block') of water and progressively higher prices for higher consumption. The company said 90% of its customers would see lower bills on this trial, according to its assessments.

Anglian Water, which supplies 7 million customers across the east of England, the UK's driest region, and South West Water are also trialling charging customers more for water used in the summer than in the winter months. The Guardian understands there are no government plans for nationwide surge pricing for water bills. A government spokesperson said: 'Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency.' They added: 'We have already ringfenced money earmarked for new infrastructure so it can only be spent on fixing the problems, and will go further by fundamentally reforming the water sector so that it works for the public, keeping bills as low as they can be.'

Andy White, a senior lead for social policy at the Consumer Council for Water (CCW), a government-sponsored body that represents customers' interests, said water companies were right to explore new tariff structures that could help manage demand and give customers more control over their bills. He said: 'Any new approach must be fair and protect customers who are already struggling with rising water costs. None of the schemes currently being trialled are designed to generate additional revenue for water companies, and many are structured so that most customers will pay less overall.' White added that companies should give consumers smart meter data to give them a clearer picture of how they use water.

A spokesperson for Water UK, the industry's trade association, said companies were working to cut down on leaks, adding: 'We also need to consider whether we could help people save water by rewarding people through their water bill. This might include eliminating standing charges or expanding discounts for customers who save water.'